Are media-AI deals a devil’s bargain?

Welcome back to Cautious Optimism. Today is May 30th, 2024. Today we have notes on startup IPOs, AI-media deals, the future of Discord, the Startup of the Day, and a good number of earnings updates from critical tech concerns! — Alex

Trending Up: Heat in Florida, Delhi, Pakistan … Google admitting the truth … genAI models for coding … space connectivity … Shares of Okta, C3.ai post-earnings … women’s sports … the pound … solar buildout in Texas …

Trending Down: Elon Musk’s camaraderie with the folks who buy EVs … botnets … Salesforce after earnings (-16% pre-market) … UiPath after earnings (-30% pre-market) … Brexit … the chance for long-term peace in Southeast Asia …

Stating The Obvious: It is a good exercise to say something that is true and known but not explicitly spelled out often enough. Enter this piece from Axios’ Dan Primack, arguing that the IPO window is open and that companies waiting to list are choosing more on “feels than facts.”

Cautious Optimism: Sure, tech companies want to list when multiples are higher. But with inflation sticker than hoped, interest rates set to stay elevated for quarters to come, and the Nasdaq trading at near record levels, the climate for public debuts is probably not getting much better for a while.

• I’m hopeful that healthy unicorns pull the trigger; I’m worried that they won’t, and the window will close, and we’ll see marooned startups stuck (again) between impatient private markets and more difficult public market conditions.

Are media-AI deals a devil’s bargain?

News that Vox and The Atlantic have closed deals with OpenAI landed like a boulder in a puddle on Twitter yesterday. Far from the first media deals that the AI company has secured, the pair of agreements show just how focused OpenAI is on getting deals done with companies that have deep historical archives and fresh reporting on world events.

You might think that media folks would be excited that their work has a new monetization channel ahead of it. After all, if OpenAI (Microsoft) is paying up, then surely Meta, Alphabet, Apple, Anthropic, Mistral, and other companies building LLMs will also cough up in time. Suddenly, there’s lots of value in journalism!

Of, if you wanted to get silly with it:

Do journalism, now with an extra layer of revenue. Not bad, right? Some people do not agree. And not just union folks or journalists that have a trenchant perspective on technology companies more generally, like this:

The Information’s Jessica Lessin wrote about AI-media deals in The Atlantic (ironically) a week ago (emphasis added):

It turns out that accurate, well-written news is one of the most valuable sources for these models, which have been hoovering up humans’ intellectual output without permission. These AI platforms need timely news and facts to get consumers to trust them. And now, facing the threat of lawsuits, they are pursuing business deals to absolve them of the theft. […] The publishers willing to roll over this way aren’t just failing to defend their own intellectual property—they are also trading their own hard-earned credibility for a little cash from the companies that are simultaneously undervaluing them and building products quite clearly intended to replace them.

Lessin argues that media deals with technology companies always result in publishers getting “burned” and that media shops should “be patient and refrain from licensing away their content for relative pennies.” Fighting words and an argument that resonates with people who make words for a living, like myself.

A shitty truth: Media companies are cutting deals from a position of financial weakness; tech companies from a position of financial strength. How fair are these deals?

On the other hand, to be cautiously optimistic, all deals closed in this first wave will eventually get renegotiated, and AI companies will be forced to decide between their models continuing to ingest smart, accurate material or scraping AI-generated pink slime from around the Web. Not much of a choice, yeah?

Nothing here helps smaller media concerns; OpenAI is never going to come to this little publication and offer a check. I wonder if Vox and The Atlantic are examples of the minimum-viable new output (in velocity terms) required to garner a marquee agreement with an LLM company. We’ll see, but while media groups roll around in the gutter looking for nickels, I would not be shocked if more deals get announced in the coming months. No matter if you or I think that they are fair transactions.

Startup of the Day: Rhea

Flush with $10 million in new capital, Rhea’s work to remake infertility care is clearly clicking in its first markets. Having gone through the infertility arc, I can confidently say from personal experience that a more integrated, intelligent service is just what the market needs. Especially as folks wait longer to have kids to ensure a well-built financial foundation for their care.

Yeah, AI is coming for your (creative) job: There is much hand-wringing about AI companies eating white-collar jobs. But the impact for creatives is already here, as Klarna showed us this week.

This is backwards. Technology is supposed to do the work while humans do the art, not the other way around.

More for your personal percolation:

• Discord is doubling down on gaming. Good.

• The mess over at Google’s search service. I am not sure how to unfuck this particular shambles.

Back tomorrow with more; hugs from here! — Alex